Funding social care: the ‘grey vote’ should take note

Professor Andy McKeon, Nuffield Trust, explores the potential impact of the Better Care Fund on social care funding.

Blog post

Published: 26/03/2014

The newspapers are full of how the Coalition Government’s Budget will benefit the ‘grey vote’. There is a new bond paying premium interest rates for those over 65 and changes to the rules on ISAs and purchase of annuities, giving greater control and flexibility, and may be better rates of return for individuals. It seems the Government giveth to pensioners.

But, it is a different story in social care, as our QualityWatch ‘Focus On’ report on social care for older people shows. Between 2009/10 and 2012/13 spending on social care for older people fell by 15% in real terms from £10.6 billion to £9.8 billion. Charges also rose by £400 million in real terms.

The overall impact is a transfer of costs from the state to individual pensioners of £1.2 billion in real terms (the premium interest rates on the new pensioner bonds will cost the Treasury £170 million in 2015/16 and rather less in future years, by the way).

The impact of the cuts on the number receiving services is clear. A quarter of a million fewer older adults received community services in 2012/13 than in 2009/10.

But we do not know if this group paid more out of their own pocket or simply went without. The latter seems at least a probability for some. In 2011, a third of women over 65 and one fifth of men report having unmet needs for some activities of daily living.

The prospects for direct spending on social care for older people look bleak. Further reductions totalling at least £0.5 billion are planned for this financial year and next.

There will be another 10% cut in Government grant to local authorities in 2015/16, meaning a further reduction of at least a further £0.5 billion if the cut in grant is translated into a proportionate £ for £ cut in spending on older people. Beyond 2015/16, austerity and cuts in public spending are set to continue.

It is against this background that the government will be creating its £3.8 billion Better Care Fund in 2015/16 - a pooled budget for health and social care to advance integration. Most of the money will be coming from the NHS.

This isn’t a straight transfer and not all the money may be spent in social care. But it will come at a time when baseline social care spending has been severely eroded. Plugging existing gaps will be the first call on the Fund.

The Fund is also an open invitation for local authorities to spend less than they otherwise might have done on social care in 2015/16, recognising that NHS funds can meet any shortfall.

It is not that NHS funds will be spent on potholes as Sir Bruce Keogh rather inelegantly put it, simply that local authorities may see this as an opportunity in setting their budgets to give extra funds from their own resources to services which have been cut much more than social care.

The Fund is also a huge gamble. It is built on the premise that spending more on social care and ‘integrated care’ will not only provide better care but dramatically reduce the burden of emergency care on hospitals, so releasing the money needed to pay for the Fund itself.

If it doesn’t do this there will be additional community services but no let-up in the inexorable rise of urgent admissions and a consequent large hole in acute hospital finances which are already struggling.

This is the most likely scenario. There is no direct link between spending on social care and hospital admissions. Nor have we been able to find many examples where services designed to provide integrated care have succeeded in reducing admissions.

And there is precious little data about community services or knowledge about how quickly and how much money can be released from hospitals even if numbers of emergency admissions fall. Flying blind with no instruments would be an apt analogy.

The issues of social care spending need to be addressed in their own right, not as some adjunct to health service concerns about hospital admissions. In particular, we should stop the magical thinking that merging health and social care budgets will bring huge efficiencies and service gains that will overcome the increasingly obvious shortfalls in NHS and social care expenditure.

There is a strong case for ring-fencing social care spending, not least because the creation of the Better Care Fund means the so-called protection given to NHS spending amongst other public services looks increasingly threadbare as NHS funds plug gaps in social care and, for the reasons given above, perhaps other local authority spending as well.

There is also a strong case for greater transparency and knowledge about what is being spent by ‘self-funders’, including in care homes, and the impact on the well-being of the group who no longer receive services. The official statistics deal only with the rapidly declining number who receive local authority services, not those who don’t.

Finally, the Government should look again at the intention in 2016/17 to cap the maximum an individual has to spend on care and to increase the amount of assets taken into account in setting charges. The current proposals will cost £1 billion.

But this will buy no more care. As the amount spent on care has fallen by over £1 billion and will probably fall further in the years to come, spending £1 billion to protect individuals’ assets looks less and less defensible.

Current hype about annuities and pensioner bonds, the introduction of the cap on social care costs, the prospect of better insurance products for long term care, the impact of the Better Care Fund and wishful thinking about the effect of merging health and social care budgets shouldn’t be used to obscure the fact that there are serious and fundamental flaws in the funding and provision of care for older people that haven’t been addressed and will only get worse.

The ‘grey vote’ should take note.

This blog was cross-posted on the Public Finance Opinion website.